What will Foodora’s exit mean for Australia’s gig economy?

The food delivery company announced it’s closing in Australia, even as it has court cases outstanding. How will this impact the gig economy contractor/employee dispute?

Foodora has announced that they will be “winding down services” and closed for business as of 20 August, even as it has impending legal matters to address.

The food delivery company is facing a Fair Work Commission unfair dismissal case later in August, and an upcoming sham contracting suit being prosecuted by the Fair Work Ombudsman. The outcomes of both are the subject of broad interest, as they have implications for the entire gig economy.

Are their workers to be considered contractors, as Foodora, Uber and similar companies argue? Or are they employees?

A quick exit, or a long goodbye?

Interestingly, the departure of Foodora could, and probably will, have an impact on legal proceedings.

“If they close down the entity itself, the case cannot proceed against an entity that has been liquidated,” says Andrew Jewell, principal lawyer at McDonald Murholme. He explains that if Foodora is using an Australian entity, they can choose whether or not to keep it alive in order to deal with these matters.

For its part, Foodora is not being overly forthcoming about its intentions. “Foodora will continue to manage legal proceedings locally in Australia and will continue to treat them with the utmost importance,” a spokesperson told the ABC. “As the matters are currently before the courts, it is not appropriate for Foodora to make any further comment at this time.”

This statement is vague enough to raise concerns. If you’re going to “manage legal proceedings”, you’re not necessarily planning on spending much time in court, regardless of the “importance” you place on them.

Certainly Tony Sheldon, national secretary of the Transport Workers Union, felt there was cause for anger. “Foodora would rather pull out of Australia and leave thousands of riders without work rather than pay them the millions of dollars they owe,” he told ABC news.

If Foodora liquidated their assets here it would become hard for other former workers to bring a lawsuit. “They might be saying, ‘we’ll deal with one’ but they’re always maintaining the right to wind up their corporation. Which would make it very difficult for anyone to bring a similar case in the future,” says Jewell.

Domino effect

Foodora’s internal thinking around what they might do if a case is brought against them regarding the contractor/employee dispute was at least partially revealed in leaked emails.

One of the company’s managers (also a former lawyer) responded to an internal update about the negative press surrounding the company with: “Our rider contracts have many keywords in them that would blur the lines between employment and contractor arrangements,” the AFR relays. “If just one rider laid a successful case it could be devastating for us and could cause a dominos like effect with lawsuits.”

And, though it’s too soon to tell, the domino effect might not be limited to Foodora.

“I’m interested to see if any others [gig economy companies] follow, or there’s any flow on. Because it might seem like a massive overreaction to have one unfair dismissal case and close up in Australia. But that says to me they’ve known they’re at risk,” says Jewell. “Foodora have their own specific circumstances, but you’d think there’s a fair few that would be concerned.”

Litigation or legislation?

One problem for waiting to see if the employer/contractor dispute in the gig economy will be solved through litigation is that each worker’s case will likely be treated on an individual basis. For example, if you work for a single app, Jewell explains, the determination of whether or not you’re an employee could be different than if you worked for several.

“Where Foodora is more vulnerable [than other gig economy businesses] is not only is there a requirement to wear a uniform. But they also have a performance criteria that makes it sound much more like an employment relationship,” says Jewell.

He is referring to revelations that the company was measuring workers’ performance and giving the best (“Batch 1”) time off work and pay rises, while making those at the bottom (“Batch 4”) wait two days to book shifts and offering them more inconvenient deliveries.

So if litigation will be slow, what about a change at the legislative level?

Both NSW and Federal Labor have said they’d bring in regulations to tidy up the employee/contractor dispute and set minimum rates of pay and provide protections against unfair dismissal to gig workers (if the parties win government). And Natalie Hutchins, Victoria’s IR minister, has said the Owner Drivers and Forestry Contractors Act is going to be amended to regulate pay and conditions for owner drivers.

“Through the Victorian Wage Inspectorate we will keep the industry accountable and make work safer and fairer for these workers,” she said in a statement announcing the inspectorate.

But Jewell thinks it’s possible there will be more litigation in the meantime. “I think it takes a few cases before legislators get cracking. I would anticipate we’ll get some more employment cases regarding gig economy businesses before there’s a big move to tighten things up.”